30-Year Fixed-Rate Mortgage: An Endangered Species? (Part 1)


The 30-year fixed rate mortgage, the foundation of the American housing market, may be on the endangered species list, thanks to the Obama administration.

Based on recent observations, the Obama administration seems committed to moving American housing policy away from homeownership toward rentals. They would do this by: (a) transforming Fannie Mae and Freddie Mac from GSEs (government-sponsored entities) to GCEs (government-chartered entities); and (b) devoting a significant enough chunk of the funds from the new GCEs into financing multifamily projects. I believe that Wall Street would cheer such a move, as it would open up an enormous new market for finance, backed by the explicit guarantee of the United States.

I also believe that the politics of 2010-2011 are such that these changes are far from unthinkable. In this first of a three-part series, I explain why: